The politics of tobacco

I ARRIVED in South Africa about seven months ago, and I have been enormously impressed by the country’s energy and passion, and I’m very excited to live and work here.

South Africa has an interesting history and a fantastic future waiting for it, and, frankly, there aren’t many more places in the world to work that are as fascinating or so invigorating.

I now have the pleasure of leading British American Tobacco SA (BAT SA), which is the largest tobacco manufacturer in South Africa and the second-largest listed company on the JSE, employing more than 2 400 people.

We are responsible for supporting more than 72 000 jobs associated with our business – including 35 000 jobs in the retail sector, as well as more than 7 000 agricultural jobs and hundreds of small businesses.

In total, our operations contributed in excess of R14.5 billion to the South African exchequer last year.

It’s an exhilarating time for BAT SA and our company is embarking on an exciting new chapter in our history.

First, we are preparing to move from Stellenbosch – our home for decades – to the V&A Waterfront in Cape Town, and we are starting to look at launching new, innovative and potentially lower-risk nicotine products in South Africa.

That said, South Africa has some particular challenges for us as a company, not least of which is the fact that the illegal tobacco trade is double the global average, or about a quarter of the total market.

This means that one in every four cigarettes smoked in South Africa today has paid no excise or VAT.

Addressing illicit trade clearly has to be a priority, not only for us as a business, but also for government, which is losing about R4 billion in tax revenue every year.

The growth in the illegal market has already eroded our market share and forced us to shed 690 jobs.

It has also placed significant financial pressure on the viability of our factory in Heidelberg, Gauteng, where we are the largest employer in the province.

It’s important to remember that the trade in illegal tobacco is not a victimless crime. The proceeds are often used to finance serious organised crimes.

Illegal cigarettes are also cheaper and more accessible than legal, fully taxed products, especially to underage consumers, which undermines public health objectives.

As you can imagine, when people discover that I head a tobacco company, they have many questions.

At the moment, it probably won’t surprise you to learn that the main question I get asked is what is going on with allegations about BAT SA’s fight against illegal tobacco, and the involvement of third parties in addressing this serious problem.

I’ve now received a full briefing on the issues and allegations that have been raised in recent years, and in the past few weeks in particular.

The allegations are something BAT SA takes seriously and my team and I have therefore made three key decisions:

1. With respect to the Twitter and media allegations recently made, we have engaged external legal advisers to conduct a full and independent investigation to address the facts properly.

These allegations will be explored comprehensively. We will not undermine the investigation by rushing it and we will take appropriate action depending on the findings.

2. We have been in touch with the relevant South African authorities to update them on our decisions.

3. We have decided that, irrespective of the outcome of the investigation, BAT SA will no longer instruct anti-illicit trade activities of the kind that have been the subject of the allegations.

We have thus instructed that all such anti-illicit trade activities will cease with immediate effect.

Going forward, I have instructed my team to focus on discussing and exploring other ways of supporting the South African government and law enforcement agencies to enforce and enhance existing laws and regulations.

I believe that these are sensible, pragmatic steps that will provide reassurance to our customers, business partners and the South African government that we are serious about investigating the allegations and resetting our approach to tackling the illegal tobacco industry.

While tobacco is a polarising subject, it is a legal product, responsible for sustaining tens of thousands of jobs across the country and generating billions of rands in much-needed tax revenue.

We can – and should – play a part in supporting South Africa to deliver its national priorities of economic growth and job creation as a responsible and legitimate member of the nation’s business community.